Bill Set Up Two Trusts in 2017

question 65

Essay

Bill set up two trusts in 2017. The first was for his son, John, to which he contributed $200,000 during that year. (The income interest was valued at $100,000 and the remainder interest's value was $100,000.) Bill plans to continue contributing money to the trust each year but John can withdraw only the lesser of $15,000 or the amount transferred to the trust each year. The trustee can pay the amount annually until John receives the trust assets at age 40. The second trust was for his 10-year old son, Tim. Bill contributed $50,000 in 2018. (The income interest was equal to $10,000 and the remainder interest was equal to $40,000.) The trustee may distribute the income or principal to Tim until he reaches age 21, at which time the assets will be transferred to Tim. In 2018, Bill contributes $10,000 to John's trust and $16,000 to Tim's trust. What types of trusts are these and what are Bill's gift tax consequences in 2017 and 2018?

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Definitions:

Shoulder Surfing

The practice of spying on someone's personal information by looking over their shoulder, often used to gain unauthorized access to passwords or other sensitive information.

Social Engineering

A technique used to trick people into divulging information, including their own personal information or corporate knowledge.

Spear Phishing

A targeted phishing attack where the attacker has researched their victim to create a highly credible impersonation.

Video Adapter

A hardware or software component that converts video signals from one format to another so they can be displayed on a screen.